The Cyprus Securities and Exchange Commission (CySEC) announced that its second target for today is IQ Option, a brand operating under its CySEC regulated entity IQ Option Europe limited, which has received a fine totalling €180,000, according to the CySEC filing.
Friday is the day of no mercy for the Cypriot regulator with CySEC just releasing another fine of €138,000 against OptionRally. The fines imposed today are a good opportunity for other brokerage firms to learn from the mistake and make sure that they will carefully obey the Cyprus watchdog’s rules.
Although the IQ Option fine announcement was made today (September 30, 2016), the decision was made during the CySEC board meeting held more than three weeks ago, on September 5.
Commenting to Finance Magnates on the matter a spokesperson for the company stated, “The fine was issued based on the results of CySEC’s inspection which took place at the Company’s offices on the 11th of February 2016. At the time of the inspection (beginning of February 2016) some procedures and policies of the company, due to its vast growth, were still in the implementation stage and as such were not in accordance 100% with the Law. Enhancements have already been made in this regard, especially to the points mentioned in CySEC’s follow up letter.”
“It is important to note that fines are usually issued within 6 months of an inspection, so at the point of the fine, the majority of issues had already been resolved,” he elaborated.
CySEC mentions in its statement that, among other things, that the company had taken mitigating actions in relation to: the provision of investment services in the Republic as well as the appointment of appropriate staff in Cyprus. Additionally it noted that IQ Option has updated its procedures manual in relation to policies and procedures and has taken other remedial actions.
“The above actions has been implemented within 2 months from the date of the inspection, that is beginning of April 2016. It was also noted by CySEC that the Company had not committed a similar violation in the past. Thus, the Company can confirm that, as at this moment, the information regarding non-compliance with governing regulation is outdated as most of the enhancements to procedures were implemented by the company in the beginning of April 2016,” the spokesperson explained.
Created in 2013, IQ Option is a binary options broker owned and operated by Alta Vista Trading Limited, Seychelles.
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The fines imposed by CySEC were due to multiple areas of non-compliance with:
- the Investment Services and Activities and Regulated Markets Law of 2007
- the Directive DI 144-2007-01 of 2012 of the Securities and Exchange Commission for the Authorisation and Operating Conditions of CIFs
- the Directive DI 144-2007-02 of 2012 of the Securities and Exchange Commission for the professional competence of Investment Firms and the natural persons employed by them
Meanwhile, the given €180,000 fine is divided into 8 categories, according to the announcement. CySEC has explained how it arrives at the total fine based on the violations against the different parts of the provisions in the IQ Option regulation.
The reason that the commission breaks down the fines is to serve as a reminder to other binary options brokers that they will also get the same fine if they decide to act unfairly towards customers.
Details breaking down the fines are as follows:
First of all, the company was fined €5,000 for not having its head office situated in Cyprus. Another €10.000 fine was given as a result of failure to approve the information provided to clients over the chosen liquidity provider.
In addition, the company did not maintain adequate and orderly records of client orders, transactions and marketing material. CySEC further explained that IQ Option’s senior management did not commit necessary time and effort to performing its duties and did not adequately review the effectiveness of the policies set up for its compliance with its obligations, and did not take appropriate remedial measures.
The company was fined a sum of €20,000 for not taking reasonable measures to prevent the operational risks regarding the outsourcing of their operations to a different third party. Another €40,000 fine was imposed for not acting in a way that would benefit the clients when assigning the trading bonus to them.
CySEC has found out that the information provided on the site, clients’ online accounts and through marketing material was not explained in enough detail or was misleading. For this, they have been fined a sum of €30,000.
The binary options broker was also fined €40,000 for not asking clients to provide the necessary information regarding their knowledge and experience to assess whether the offered investment service or financial instrument was appropriate for them. On a related note, CySEC issued a fine of €15,000 since the information provided on the company website was not sufficient to allow clients to reasonably understand the nature and risks of the investment service the company offers.
Finally, CySEC highlights a €20,000 fine for not taking all the reasonable steps to obtain the best possible result for its clients when executing orders, which resulted in some cases in losses for clients when they could have made profitable trades.